The Tort of "Innocent Misrepresentation" actually consists of TWO distinct theories, both of which impose liability without regard to any "fault" by the defendant. (1). Historically, liability for truly "Innocent" (but false) Misrepresentations was limited solely to those classes of business transactions in which the seller of goods made some false (or inaccurate) statement concerning the subject of the parties' transaction which induced the buyer to enter into that transaction (usually for the purchase of goods or property). As originally applied, Tort liability for "Innocent Misrepresentations" was imposed only if the seller had some financial interest in the outcome of the particular transaction in which the misrepresentation was made. Thus, Restatement (Second) of Torts, Section 552C recognizes a kind of "strict liability" in Tort, even for purely innocent misrepresentations of material facts affecting a transaction, but only if the parties are otherwise engaged in a business transaction. One might wonder why a separate Tort remedy would even be necessary with respect to these types of business transactions, since the injured buyer would almost certainly also have an action based upon Breach of Contract (or Warranty, either Express or Implied). The answer, apparently, lies in the type of damages which could be recovered. The buyer's Contract remedy is generally limited to rescision of the contract, together with any actual out-of-pocket losses which may have been incurred by the buyer as a consequence of the original transaction. By recognizing a separate Tort remedy, the buyer was allowed to keep the property in question, and still recover as "Damages" any actual "out-of-pocket" losses that may have also been incurred as a consequence of the transaction. Obviously, the Tort action for "Innocent Misrepresentation" has a much greater potential for deterrance. Moreover, since it is based upon a theory of Tort, an action for "Innocent Misrepresentation" is not subject to the same limitations and restrictions imposed upon traditional Contract actions (e.g., disclaimer defenses, etc.). Still, Tort actions based upon "Innocent Misrepresentation" under Restatement (Second) of Torts, Section 552C were still quite restrictive in their potential application to many types of transactions.(2). To fill some of the gaps which remained in the Tort of "Innocent Misrepresentation" even after the adoption of Section 552C, the Restatement (Second) of Torts, Section 402B also imposes a similar form of "strict liability" in Tort against certain sellers who misrepresent their products. This Section imposes liability (without fault) upon the "sellers of goods who, by advertising, labeling, or otherwise," misrepresent to the public material facts about their products which cause physical injury to the consumer. Obviously, Section 402B "strict liability" for purely "innocent misrepresentations" made to the public is quite restrictive in that it still does not impose any liability whatsoever for such a misrepresentation where the buyer's only loss is merely "economic" (as opposed to a physical, personal injury). The drafters of the Restatement (Second) of Torts did propose the extension of this liability to include both economic as well as physical, personal injuries to the consumer (in proposed Section 552D), but this Section was never adopted. Thus, Section 402B "strict liability in Tort" for purely "innocent" public "misrepresentations" offers a potentially powerful Tort theory applicable to any consumer product transaction in which the consumer sustains some type of physical injury from the product. Although this theory is underused in most jurisdictions today, it nevertheless remains a very significant Tort theory which can be asserted in appropriate consumer product injury cases, without any showing of "fault." The only thing that the injured plaintiff must prove is that he or she relied upon a false (or misleading) statement made by the seller of some material fact concerning the injury-causing product in question. [Note that "privity" is not even required, only reliance upon the seller's representation, which can be accomplished through advertisements, labeling, or "otherwise."]. Since liability under Section 402B for "Innocent Misrepresentations" is based upon a "no fault" theory of Tort, presumably neither Contract nor traditional fault-based Tort defenses such as "Contributory Negligence" or "Comparative Negligence" would be appropriate in defense of Section 402B claims. This makes Section 402B "strict liability" particularly attractive as a potential theory of Tort liability to be asserted in those cases where the buyer (or perhaps even some other foreseeable user who relied upon the seller's "misrepresentation" when using the product) has been injured by the product.
In addition to Sections 552C and 402B of the Restatement (Second) of Torts, READ and study the following cases:Hauter v. Zogarts, 14 Cal. 3d 104, 120 Cal. Rptr. 681, 534 P.2d 377 (1975).
Bevins v. Ballard, 655 P.2d 757 (Alaska 1982).
ANSWER QUESTIONS ABOUT THE TORT(S) OF "INNOCENT MISREPRESENTATION".
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